What happens when an annuity contract is annuitized?

What happens when an annuity contract is annuitized?

• A. The insured receives the entire account balance.
• B. The policy owner maintains ownership of the funds.
• C. The insurer takes ownership of funds in the account and the annuitant receives a guaranteed income stream.
• D. Premiums stop and no benefits are paid.

Answer: (C)

When an annuity is annuitized, the contract moves from saving to guaranteed income. The insurer takes control of the funds to fund a guaranteed stream of payments to the annuitant, which can be for life or for a specified period. The owner no longer has access to the lump sum and typically stops paying premiums as the payout phase begins. This setup is why the option describing the insurer taking ownership of the funds and providing a guaranteed income stream is the correct choice.

When an annuity is annuitized, the contract moves from saving to guaranteed income. The insurer takes control of the funds to fund a guaranteed stream of payments to the annuitant, which can be for life or for a specified period. The owner no longer has access to the lump sum and typically stops paying premiums as the payout phase begins. This setup is why the option describing the insurer taking ownership of the funds and providing a guaranteed income stream is the correct choice.